An environmental think-tank, Carbon Tracker, has predicted that oil and gas producing countries will experience a drop in revenue by 2040 due to the rise in green energy.
The analysis by the London-based tracker indicated that the loss would affect vulnerable countries that are solely dependent on oil stating that it does not exclude several OPEC members.
The report stated that some countries would lose more than 40% of the government revenue because the world is trying to cut down on fossil fuels.
Carbon Tracker encouraged petrostates to halt any plan of investing largely on oil and gas while also calling for a diversified economy that would recoup them eventually.
It estimates the cumulative total revenue loss for all oil-producing countries by 2040 will be $13 trillion (in 2020 dollars).
But producers should coordinate “an orderly wind-down of production, with global supply falling in line with decreasing demand and falling oil prices” in order to minimize their financial losses, the report said.
“If they go it alone and seek to monetize their existing reserves while they can, oversupply is likely to destroy value for all, with falling prices quickly outweighing the benefit of increased production, ” Carbon Tracker reported.
OPEC has long maintained that oil will remain a dominant energy source in the decades to come. The bloc’s latest long-term forecast projects that peak demand will not occur until around 2040, when global consumption will rise from pre-pandemic levels of about 100 million b/d to hit 109.3 million b/d, before declining to 109.1 million b/d in 2045 and plateauing “over a relatively long period.”
However, the agency, which described the report as a wake-up call to oil-producing and international policymakers, warned that the price of oil will fall to meet climate targets.
The report says, “Government oil revenues will shift dramatically as the market shakes out during the energy transition,” co-author Andrew Grant said in a statement. “Understanding the scale of the challenge and which nations are most vulnerable will help policymakers focus their efforts. Cushioning the landing for hundreds of millions will deliver better outcomes for both climate and human development.”